Monday, October 18, 2010

I recently wrote about how Ashburn, VA has become the hub of east coast data centers, and is carrying on Northern Virginia's, and particularly the Dulles Corridor's, legacy as a center for telecommunications providers. That said, with Equinix (EQIX), Telx, Digital Realty (DLR), and now DuPont Fabros (DFT) all operating facilities in Northern New Jersey, you could argue the east coast data center hub is really near Giants Stadium, not Dulles Airport. However, the tenant mix shows that New Jersey is unquestionably the financial hub, while Northern Virginia is the hub for everyone else.

Equinix's flagship NY4, located in Secaucus, is a 300,000+ square foot facility dominiated by financial tenants, including Tudor Investment Corporation, TheStreet.com, JP Morgan Chase, Direct Edge, Citadel Investment Group, ACTIV Financial, and Hardcastle Trading. Compare that to its DC2 facility in Ashburn, whose tenants include The Motley Fool, Accenture, The College Board and Electronic Arts. But the firm really impacted by the difference between New Jersey and Virginia is DuPont Fabros (DFT), which is based in DC and built five of its first seven properties in Northern Virginia, and is now expanding into New Jersey where the news on leasing activity has been fairly quiet.

DuPont Fabros has an impressive tenant roster in Ashburn, including Yahoo (YHOO), Facebook, and Rackspace (RAX). Northern Virginia's data center presence with major websites is strengthened further by one of the DLR facilities on Devin Shafron Drive, which serves as the east coast hub for Amazon's (AMZN) EC2 service. When you order that service, the DLR building is the "Virginia location" Amazon allows you to select on its web-based entry form.

Digital Realty has had success in New Jersey by building on its base of wholesale customers like Telx in Weehawken and Savvis (SVVS) in Piscataway, which in turn sell to financial traders. But DFT has historically relied on leading websites, not financial service providers or co-lo providers. Rackspace has its 2nd largest facility in DFT's Elk Grove Village center near O'Hare Airport, and its east coast hub at DFT's ACC4 in Ashburn. However, Rackspace does not sell to low latency financial traders, and its managed hosting service is designed to be geographically independent of its customer's physical locations, which means it has no need to expand to Northern New Jersey.

It will be interesting to see how DFT does in New Jersey, far more so than in its new building in Santa Clara, because Silicon Valley data centers look like mirrors of Northern Virginia's. And when it comes to tenant mix, market characteristics, and customer requirements, New Jersey and Northern Virginia have little in common. One is the unquestionable east coast hub for financial traffic, the other the east coast hub for web traffic.